Samsung faces sanctions over latest dirty trick in Apple case

October 3, 2013: 8:49 AM ET

A hearing on the leak of confidential Apple documents is scheduled for Oct. 22.

Screen Shot 2013-10-03 at 8.22.55 AMFORTUNE -- In advance of last year's big patent infringement trial that resulted in a billion dollar judgement against Samsung -- not a penny of which has yet been paid -- Samsung's attorneys demanded that Apple (AAPL) turn over the contents of its patent licensing agreements with Nokia (NOK) and three other manufacturers, Ericsson, Sharp, and Philips.

Apple complied, as it is legally required to do, marking the exhibits "Highly Confidential -- Attorney Eyes' Only" and trusting that the court's protective order -- and the threat of sanctions -- would keep the sensitive information out of the hands of Samsung's executive team.

The threat did not work.

In a sharply worded court order released Wednesday, U.S. Magistrate Judge Paul Grewal outlined the path by which Apple's carefully guarded secrets made their way from Samsung's outside attorneys to an expert witness, back to Samsung in unredacted form, onto an FTP site visible to at least 50 Samsung employees, and into the hands of one of Samsung's licensing executives, Dr. Seungho Ahn.

In a June 4 meeting with Nokia's Chief Intellectual Property Officer, Paul Melin, Dr. Ahn said that outside counsel had provided him with the terms of the Apple-Nokia patent license. And to prove it, he quoted from the confidential document, telling Melin that "all information leaks."

Nokia complained. Apple demanded sanctions. And Judge Grewal drafted a court order that began:

Time and again in competitor patent cases, parties resist producing confidential information to their adversaries' lawyers. They fear, among other things, that the lawyers will insufficiently shield the information from the competitors that they represent. Yet time and again, the court assuages these fears with assurances that a protective order will keep the information out of the competitors' hands.

A casual observer might reasonably wonder what magic a protective order works that allows outside counsel access to confidential information to advance the case without countenancing untoward uses by the client.

The answer is not a magical one at all: confidential information remains confidential because counsel and clients alike follow court orders. If parties breach this basic rule, the court's assurances become meaningless.

There is reason to believe the rule has been breached in the present case.

That last sentence is generous, because as Judge Grewal makes clear, he has every reason to believe Samsung not only violated the order, but is engaged in a cover up:

It is possible that Dr. Ahn's encounter with Mr. Melin occurred very differently. Unfortunately, the court cannot say, because Samsung has elected not to provide the court with any sworn testimony from Dr. Ahn or anyone else at the meeting. Samsung also has failed to supply the court with any evidence at all regarding other uses of the Apple-Nokia license, or those of the other confidential licenses.

Samsung did offer to conduct an internal investigation, an offer the Judge dismissed as "insufficient."

"Rarely," he wrote, "is the fox permitted to investigate without supervision the disappearance of chickens at the henhouse."

Judge Grewal ordered Samsung to provide the missing information -- and make Dr. Ahn available for deposition -- no later than Oct. 16. A hearing on the matter is scheduled for Oct. 22.

If sanctions are imposed on Samsung, they would not be the first. Below the fold, a partial record of Samsung  dirty tricks compiled from public documents by reader TeeJay2000.


Current Issue
  • Give the gift of Fortune
  • Get the Fortune app
  • Subscribe
Powered by VIP.